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Brazil’s political unrest and severe economic deterioration have essentially closed off credit markets to companies based in the country. One of its largest airlines, Gol, was fighting losses as Brazil’s economy started its slow downward trajectory, beginning in 2012. By mid-2015 Gol was forced to undertake a restructuring that included equity injections, renegotiating with suppliers, and, more recently, an attempt to restructure unsecured bonds, which the company stresses is crucial for completing all the facets of its restructuring.

Aside from attempting to create a reasonable financial foundation to weather the economic crisis, Gol continues to cut its capacity and has suspended eight routes in its network. However, Gol argues that its smaller Brazilian competitors have continued to expand their capacity, which has offset the benefits of capacity reductions undertaken by Brazil’s largest airlines – TAM and Gol.

Gol has suffered on all fronts from Brazil’s economic crisis, which shows no signs of improving for at least two more years. It is tough to predict the composition of Brazil’s aviation industry at that time, but Gol, with some help from its partner Delta, is working feverishly to ensure that it retains its leadership position in the market once the recovery begins.

Mexico’s largest airline, Aeromexico, plans slightly higher capacity growth in 2016, mostly driven by added frequencies to its long haul markets in Asia and Europe. Its preliminary guidance shows an ASK increase in the low single digits versus 8% growth in 2016. Similarly to 2016, much of Aeromexico’s capacity should be deployed to international markets as the airline sheds three Boeing 777 widebodies and adds five 787-9s to its fleet.

Aeromexico and Delta continue to believe US regulators will approve their immunised cross-border joint venture by YE2016, and are planning to increase their combined daily flights between the two countries by 43% during the next two years. The joint venture is a major pillar of Aeromexico’s transborder strategy going forward as Delta prepares to exert more influence over Aeromexico’s strategy. Some of Aeromexico’s and Delta’s rivals are lobbying for the two airlines to relinquish more slots at Mexico City Juarez, which could become a factor in the government’s final decision.

In the near term Aeromexico’s outlook is relatively stable, despite continuing challenges from the depreciation of Mexico’s currency. The airline’s revenue generation for the 9M ending Sep-2016 was favourable, driven by increases in yields and load factors.

NOTE: This report was prepared before the DoT issued its decision in the Aeromexico-Delta joint venture